In attempt to bridge the gap between a proposal submitted by Greek PM Alexis Tsipras last Monday and a draft agreement devised by creditors the following day, Athens has reportedly submitted a new three-page plan focused on fiscal sustainability.

A second document was also submitted in which Greece has apparently proposed borrowing from the ESM to cover its obligations to the ECB in July and August. Those payments amount to around €7 billion.

The Greek government submitted a three-page budget proposal to its creditors in Brussels in a bid to unlock bailout funds, two international officials with direct knowledge of the discussions said.

The document covered only fiscal targets, one of the people said. Greece gave its creditors a separate note, also three pages long, on how to address the country’s financing needs, in which the government asked to use funds from the European Stability Mechanism to repay about 6.7 billions euros ($7.6 billion) of bonds held by the European Central Bank that come due in July and August, the people said.

Greece has already received €129 billion from the EFSF. Borrowing from the ESM to pay the ECB is essentially borrowing from Europe to pay Europe, much as the country tapped its IMF SDR to pay the IMF in May. As an aside, May’s IMF end-around depleted Greece’s SDR to the tune of 95%. Its SDR holdings now amount to just €30 million. Greece’s ESM paid in capital is around €2.2 billion.

At least one unnamed official who spoke to Bloomberg isn’t optimistic:

Greek govt’s revised proposal to unlock bailout funds is vague rehash of earlier plans, not considered credible, an international official directly involved in talks says.

Meanwhile, Greek islanders are restless over the VAT hike proposed by creditors (and so far rejected by Athens) and have moved to hold a referendum with the support of FinMin Varoufakis.

Greek islanders are threatening to hold a referendum on whether to veto proposals by the country's international lenders to scrap a reduced rate of value added tax for the islands, a regional governor said on Tuesday.

Plans to increase VAT have been a sticking point in talks between the Greek government and its European and International Monetary Fund creditors, as the two sides try to hammer out a cash-for-reforms deal to unlock further aid. Athens argues the hike would hit tourism, its main source of revenue.

Yorgos Hatzimarkos, governor of a south Aegean cluster of islands that includes popular destinations such as Mykonos and Santorini, said his region had decided to hold a referendum with the backing of Finance Minister Yanis Varoufakis.

Greece contends that hiking VAT by 23% would spell disaster for tourism which, according to the country's tourism chief, is the "one sector that's doing well."

Speaking of 'sticking points' and "red lines", Tsipras is still holding on to the idea that he can strike a deal that doesn't include pension reform, something that's come up time and again throughout the fractious negotiations. It's unclear whether the PM's hardline stance on pensions will soften as June 30 approaches, but it seems clear that until Tsipras is willing to discuss the issue, any proposal out of Athens will be a non-starter, which is why the following quote from an interview with Corriere della Sera is largely meaningless:

"I think we're very close to an agreement on the primary surplus for the next few years. There just needs to be a positive attitude on alternative proposals to cuts to pensions or the imposition of recessionary measures."

In Germany, tensions are said to be rising between Chancellor Angela Merkel and FinMin Wolfgang Schaeuble. Fed up with what he perceives to be belligerence and, frankly, naiveté on the part of Syriza party officials, Schaeuble is ready to cut Greece loose, while Merkel, conscious of the 'Russian pivot' and wary of unknowable geopolitical ramifications, prefers concessions. Kathimerini has more:

A split between German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble is widening over Greece as the funding standoff goes down to the wire, said people familiar with the matter.

Merkel is ready to make concessions to keep Greece in the euro because of geopolitical concerns, while Schaeuble is willing to let the country exit the euro unless its government takes measures to ensure the country’s long-term survival in the monetary union, said the people, who asked not be identified speaking about internal party discussions.

That divide is also reflected in Merkel’s parliamentary caucus, which is increasingly uneasy with letting the 41-member budget committee decide on disbursing any aid to Greece and is looking instead at a vote of the lower house of parliament on a deal that includes changes to previous agreements, they said. The Finance Ministry declined to comment on the internal deliberations and referred to a statement last week by spokesmen for Merkel and Schaeuble said the two are working closely on the crisis...

Many lawmakers in Merkel’s 311-strong caucus made up of the Christian Democratic Union and Bavarian Christian Social Union are finding it difficult to support the chancellor’s position and would side with Schaeuble if forced to choose, the people said.

In sum, it looks as though the Greeks have essentially submitted the same proposal they submitted last week. That is, the "red lines" on VAT and pension cuts have not changed and as such, creditors won't likely budge. This was to be expected given that Athens has bought itself a bit more time by going the so-called "Zambian" route with its June IMF payments.

Political discussions are reportedly "ongoing" in Greece, which presumably means Tsipras is attempting to negotiate with Syriza party hardliners in an effort to determine if any further concessions to creditors would be acceptable in terms of passing an agreement through the Greek parliament. In other words, this latest "proposal" is likely nothing more than a token submission in lieu of a more serious effort later this month.